“I am more optimistic that we will be able to reach a political agreement this year,” German Finance Minister Christian Lindner said after the Ecofin meeting. Lindner suggested that the Stability and Growth Pact reform could indeed be completed by December 31, thus avoiding a return to pre-pandemic rules.
Of course, it remains to be seen which specific requests from Germany and the so-called ‘frugal’ countries of the North will be accepted.
European diplomatic sources close to the Ecofin negotiations told “Naftemporiki” that Germany and its ‘frugal’ partners seem perfectly content with Ecofin adopting the principle of establishing specific criteria or “benchmarks.” Berlin is even happier to have passed the principle of ensuring the “deficit resilience” of member states.
The question is which demands of the countries of the South, such as France, Italy, Spain and Greece, will be met, aiming to remove public green and digital investments spending, as well as defense spending, from the budget in order to find a possible final compromise solution.
The negotiation is still open, but the same sources told “Naftemporiki”, that the two camps converge in the opinion that “the projects to be financed by the Recovery Fund in 2025 and the national co-financing of the EU funds, will be taken into account whenever a member state requests an exemption from the principle of spending plans – provided that this does not jeopardize fiscal sustainability in the medium term.”
Defense Investments Exemption
According to the same sources, defense investments will be excluded from the calculation of the deficit in the new Stability and Growth Pact. Another point that is being negotiated in favor of countries with debt exceeding 60% of GDP is also the repayment period.
Denmark has also proposed that the reassurance for debt reduction will start 4 years after the adjustment period that lasts 4-7 years. The period is therefore extended to 8-11 years. It is a longer period for debt reduction, but still shorter than the original Spanish proposal which calls for a reduction period of 14-17 years.
No return to the old Stability and Growth Pact
European diplomatic sources told “Naftemporiki” that the Spanish presidency is ready to convene an emergency EU finance ministers meeting at the end of the month, estimated around November 23.
Nadia Calvino, Spain’s Economy Minister and President of the Council for this semester, ruled out a return to the old Pact instead of reforming it.
“What we have heard from everyone is a very strong commitment to adopt the new rules.”
On his part, French Finance Minister Bruno Le Maire commented: “In the negotiations, the climate is excellent and we are heading in the right direction.”
Less Intransigence
“Right now the two camps are still interacting strategically to assert their positions,” the diplomatic sources said. “The European economic outlook is gradually deteriorating and the gap with the United States is widening. In addition, the ECB’s monetary policy remains tight, so it is important that fiscal policy does not become too restrictive, as would happen if we were to return to the old rules,” the same sources stated to “Naftemporiki”.
After all, they added, Germany has already benefited from the relaxation of state aid regulations, and this flexibility achieved should be offset by a reform of the Pact, in the name of relaxation…Berlin should be less intransigent. Ultimately we all share the same goal, fiscal sustainability in the medium and long term.
